Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Cash out refi while I can?
Old 12-02-2020, 11:07 AM   #1
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
Cash out refi while I can?

Situation:
FIREing in a month, and will have no income thereafter.
Will be pulling from my taxable 401K savings for the next 3 years penalty free (I'm over 55).
Currently have a very low amount of after tax cash, so all living expenses, house upgrades (we need new windows), etc. will be from taxable 401K money.
I have no mortgage or other debt currently


Question:
Would it behoove me to do a cash out refinance now on my current house at a 3% rate plus fees while I still have an income in order to keep most/all the 401K money I withdraw in the 12% bracket for the next 3 years? Might also help with health care subsidies to keep income low, right? Doing this after my income ends will probably not be possible.
Are there risks in doing this?
cat4ever is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-02-2020, 11:29 AM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 5,829
No, but I would set up. HELOC big enough to cover any known expenses like new windows plus a chunk in reserve for emergencies. I think you’ll find variable rates in the mid to low 2% range with no cost. Sometimes they require a minimum draw to get the line established but otherwise no cost until you use it.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 12-02-2020, 12:07 PM   #3
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
Does a HELOC have income requirements? Or is that something I can put off until I need it, i.e. after FIREing? Also I always assumed interest rates weren't as good on HELOC's, is that a bad assumption?
cat4ever is offline   Reply With Quote
Old 12-02-2020, 12:41 PM   #4
Thinks s/he gets paid by the post
 
Join Date: Aug 2016
Location: Northern Virginia
Posts: 3,105
Easier to get HELOC while you have income for sure.

I think you are thinking about some good things. What is tax situation beyond the next 2-3 years?

Use of debt to manage income can make some sense with low rate debt, but you have to run the numbers. How much subsidy is in play?

Good things to plan for sure.
Montecfo is offline   Reply With Quote
Old 12-02-2020, 12:44 PM   #5
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
Beyond next three probably not bad. I have a current 1.1 million Roth I can use to keep income low, however I would like to buy a second home at some point and would like to pay cash due to problems getting mortgage sans income. would probably do airBnB rentals with it to recoup some costs.

I wouldn't even want to guess at subsidies, things will be changing I'm sure and I'll likely be on COBRA for next year and a half.

Note I can't use the Roth now since I'm only 56.5.
cat4ever is offline   Reply With Quote
Old 12-02-2020, 01:17 PM   #6
Thinks s/he gets paid by the post
Out-to-Lunch's Avatar
 
Join Date: Jan 2020
Location: Milwaukee
Posts: 1,166
Quote:
Originally Posted by cat4ever View Post
Note I can't use the Roth now since I'm only 56.5.
You are allowed to withdraw the amount of your contributions at any time.
Out-to-Lunch is offline   Reply With Quote
Old 12-02-2020, 01:34 PM   #7
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
It's an old roth, opened in 98. Only about 70K in contributions. Combined with current after tax cash and 401K before tax funds, I figure a 200K HELOC or Cash out refi would put me in good stead for home projects and/or a vacation home buy should the perfect house pop up.
cat4ever is offline   Reply With Quote
Old 12-02-2020, 02:59 PM   #8
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 5,829
HELOC rates are almost always variable. Right now you could prolly get a lower HELOC rate vs 30 yr fixed but of course the HELOC will adjust when rates rise. They are generally based on an index and a margin and should have caps for max rate and annual change. My HELOC is set to Prime Rate and the margin is -.76. It can change monthly but no more than 2%/yr.
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 12-02-2020, 03:37 PM   #9
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
Not a bad option. No closing fees and I guess I could cash out if rates got too bad by taking the tax hit to my 401k money
cat4ever is offline   Reply With Quote
Old 12-02-2020, 03:48 PM   #10
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: Aug 2004
Location: Laurel, MD
Posts: 5,829
I know it's a long shot.....does your 401k have a loan option after separation?
__________________
...with no reasonable expectation for ER, I'm just here auditing the AP class.Retired 8/1/15.
jazz4cash is offline   Reply With Quote
Old 12-05-2020, 07:01 PM   #11
Full time employment: Posting here.
 
Join Date: May 2013
Posts: 580
I applied for cash our refi early this year (and pulled out because they literally requested about 1,000 pages of documentation!) and just closed on a HELOC yesterday. Honestly I don’t think you can get it done in a month. The banks and credit unions are working at capacity right now.
__________________
Saved 8 figures by my mid-40's as a professional bubble-spotter. Beware...the Fed creates bubble after bubble after bubble.
RenoJay is offline   Reply With Quote
Old 12-05-2020, 07:13 PM   #12
Recycles dryer sheets
 
Join Date: Jul 2020
Posts: 144
Yeah, you may be right. Are there fewer docs/less time with a HELOC? Who did you get your's with?
cat4ever is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Cash-Out Refi to Pay Off Student Loans? turbo89 Young Dreamers 15 09-25-2020 10:38 PM
Cash out refi pros/cons columbus FIRE and Money 24 11-14-2019 07:23 PM
Refi or pay off mortgage with cash Synergy FIRE and Money 3 05-29-2012 03:24 AM
How to find out reason refi refusal glinka FIRE and Money 8 12-05-2010 08:16 AM
The time has arrived, Get out while you can! RockOn FIRE and Money 66 03-13-2008 02:21 PM

» Quick Links

 
All times are GMT -6. The time now is 09:49 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2021, vBulletin Solutions, Inc.